On September 25, 2025, President Trump announced 100% tariffs on imported branded or patented pharmaceuticals, effective October 1, 2025, unless the importing company is building U.S. manufacturing capacity (defined in President Trump’s announcement as “breaking ground and/or under construction”). The policy is being advanced under Section 232 “national security” authority.
Large pharmas have mostly taken this new policy in stride. Many companies, including large European pharmas, have already announced plans to build U.S. manufacturing facilities that may qualify them for exemption from these tariffs. Additionally, diversified portfolios, deep capital resources, and commercialization on a global scale uniquely give large pharmas room to absorb this new added cost or to accelerate reshoring of manufacturing logistics.
However, smaller biotechs face a different reality. Most rely on CDMOs for their manufacturing needs – often in China, India, or Europe – for APIs and finished drug product. Without readily available U.S. manufacturing capacity (and expertise, in certain circumstances) to fall back on, a 100% tariff would double upstream costs overnight, severely constraining biotechs’ ability to commercialize their own drug products or to meet manufacturing obligations owed to licensee partners.
It is not yet clear whether these tariffs would apply to the importation of APIs and possibly bulk drug products that are intended for use in clinical trials and not for commercial sale. This should be an area of focus for industry groups such as PhRMA and BIO to lobby for an exception; taxing the import of a drug that is being used for clinical trials stifles innovation and encourages running clinical trials outside of the United States (potentially limiting opportunities for patients in the United States to enroll in and benefit from clinical trials).
Because the tariff applies to the value of the imported good, importing bulk API and shifting bulk drug product manufacture and/or product fill/finish to a U.S. facility would reduce tariff exposure, if that strategy is practically feasible. The API’s cost base is typically far lower than the bulk (generally) or fully finished product, meaning the tariff impact should be smaller. Unlike API manufacturing, which is technically complex and capital-intensive, bulk (generally) or fill/finish product manufacturing is more modular and can sometimes be transferred to U.S. CMOs with shorter lead times. Still, companies would need to plan for regulatory submission bridging, quality validation, and potential U.S. capacity constraints.
Key unknowns remain:
- How regulators define “building” (expansions vs. greenfield, timing, validation).
- Whether there will be transition rules or grandfathering for existing supply contracts and in-process inventory.
- Whether treaty partners will win carve-outs or challenge the tariffs in court.
- Whether the tariffs will apply to drug products being imported for clinical trials.
Practical steps for biotechs and their investors:
- Review key supply contracts and license agreements for the treatment of tariff costs, including in the gross-to-net calculations.
- Evaluate the feasibility of strategic shifts, such as U.S.-based fill/finish while continuing to import API.
- Track exemption rules – modest domestic investments (possibly even through joint ventures with other biotechs) could create eligibility.
- Engage in rulemaking and advocacy to influence definitions, timelines, and carve-outs.
- If the final rules will impose tariffs on imports for clinical trials and the costs are material, companies may reconsider clinical development plans and where trials are enrolling patients.
Bottom line: For Big Pharma, these tariffs may be costly but manageable. For smaller biotechs without U.S. manufacturing, they are likely to be much more challenging to manage.
Gibson Dunn’s Life Sciences and International Trade teams are closely tracking tariff developments. Our attorneys are available to assist clients as they navigate the challenges and opportunities posed by the current, evolving legal landscape.